On Tuesday, Apple unveiled a new leasing initiative named Apple Upgrade, allowing customers to lease an iPhone for as little as $17.99 per month.
This program, established in partnership with the buy-now-pay-later firm Klarna, also extends to the Apple Watch, Mac, and iPad, subsequently phasing out the previous iPhone Upgrade Program.
Quick Summary – TLDR:
- Apple Upgrade enables U.S. consumers to lease devices via Klarna rather than purchase them outright.
- Monthly leasing rates commence at $17.99 for the iPhone, with terms available for one or two years, and no security deposit is mandated.
- The retired iPhone Upgrade Program previously required payments exceeding $42 monthly and included AppleCare in the costs.
- Klarna retains ownership of the leased devices for the full term; failure to make payments for three consecutive months may terminate the lease.
- Current members of the iPhone Upgrade Program must transition to Apple Upgrade, opt for Apple Card installments, buy outright, or utilize carrier financing.
Apple Retires Old iPhone Financing for a Klarna Lease
Apple has commenced its Apple Upgrade initiative for U.S. customers, enabling users to lease devices such as the iPhone, Apple Watch, Mac, or iPad instead of making a direct purchase.
In an official announcement, Apple specified that leasing terms vary; they last one or two years for iPhone and Apple Watch, while the Mac and iPad span two or three years.
Monthly payments start at $17.99 for the iPhone, $11.99 for the Apple Watch and iPad, and $24.99 for the Mac, with no upfront deposit required.
Each device under this arrangement is owned by Klarna for the entire leasing duration. Applicants undergo a soft credit inquiry without late fees, but failure to make payments for three months leads to lease termination.
Notably, the iPhone 16, iPhone 16 Plus, Apple Watch SE, MacBook Neo, Mac mini, iPad (A16), and Studio Display are excluded from this leasing program.
The new leasing option supersedes the previous iPhone Upgrade Program, which was supported by Citizens Bank and introduced in 2015, bundling AppleCare with payments exceeding $42 a month.
Apple has officially ceased the earlier program and indicated that users in the iPhone Upgrade Program can either lease with Apple Upgrade, finance with Apple Card Monthly Installments, make direct purchases, or opt for carrier financing.
Now official: Leasing prices start as low as $17.99 per month for iPhone, $11.99 for Apple Watch, $24.99 for Mac, and $11.99 for iPad. https://t.co/hciMVX4SCg
— Mark Gurman (@markgurman) July 28, 2026
Why Is Apple Leasing Instead of Selling?
The timing of Apple’s leasing program emerges amidst escalating component costs. In June, Apple elevated entry-level prices for iPads and Macs by a minimum of $100, attributing the hikes to a global shortage of memory, with some configurations surging over $1,000 more.
Analysts from Morgan Stanley anticipate a potential $200 increase for the upcoming iPhone 18 Pro to safeguard profit margins, while TechInsights suggests that rising material costs could inflate the bill to produce an iPhone by up to $300.
Nabila Popal, IDC’s senior research director, connected these pressures to the choices of installment financing. Following Apple’s pricing alerts in June, she remarked to CNBC:
“Most of Apple’s consumers, especially in the U.S. and other developed markets, are buying devices on installment plans or trade-ins, so we can expect to see much more aggressive offers.”
Given that the iPhone is pivotal to Apple’s overall revenue—contributing nearly half of total earnings and commanding a 32.3% share of the global smartphone sector—spreading the increased cost across two years of nominal payments allows Apple to keep upfront prices manageable as manufacturing expenses escalate.
The Trade-Off Behind the Lower Payment
The initiation of Apple Upgrade presents a more economical alternative than previous financing modalities, including the erstwhile program’s fee exceeding $42 and the 0% APR Apple Card Monthly Installments, which remains tied to the full purchase price. Competing carriers like AT&T, Verizon, and T-Mobile provide their own installment plans.
Ownership delineates the fundamental difference between leasing and alternatives: a leased iPhone remains under Klarna’s ownership throughout the leasing period, necessitating an eligible postpaid carrier plan.
If customers wish to retain the device, they must pay a final purchase fee, or risk transitioning into a more expensive month-to-month arrangement for an extended six-month period.
This trade-off is reflective of a broader trend in subscription pricing. Over 61% of participants in Deloitte’s 2026 Digital Media Trends survey indicated they would discontinue a favored service due to an increase of merely $5, highlighting a waning tolerance for significant pricing shifts in subscription economies.
What This Means for Upgrade Cycles?
The current average replacement cycle for iPhones has expanded to nearly four years, as reported by Bernstein, a Wall Street research firm.
A leasing program that mandates the return of devices after 12 or 24 months inherently contradicts this trend.
The leasing model for the Apple Watch operates similarly, further capitalizing on a category where Apple already reigns, boasting a 23% share of global smartwatch shipments as of 2025, reclaiming its leadership position in the market, according to Counterpoint Research.
Several aspects remain uncertain, including whether the iPhone 18 Pro will indeed reflect the full $200 increase posited by Morgan Stanley, and if the anticipated foldable iPhone will debut alongside it in September at the projected cost of approximately $2,500.
Apple has yet to confirm these details. Additionally, this program’s launch coincides closely with Apple’s upcoming third-quarter earnings call, marking Tim Cook’s last before transitioning to executive chairman.
SQ Magazine’s Takeaway
The Apple Upgrade program adeptly addresses a significant challenge: maintaining low monthly payments amidst rising device manufacturing expenses.
By structuring leasing agreements, Apple effectively offloads credit risks and logistics related to used devices to Klarna, mirroring the transition wireless carriers made to leasing models long ago.
A rapid progression lies ahead. With earnings reports on the horizon post-launch, analysts are poised to delve into the ramifications of leasing on device revenue and the pricing for the iPhone 18 Pro.
Users currently enrolled in the iPhone Upgrade Program should monitor their accounts for transition notifications, rather than assuming automatic continuation of their existing arrangements, and those evaluating financing options must consider the return or elevated payment implications of leasing compared to outright ownership.
Source link: Sqmagazine.co.uk.
